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Mexican Government Deepens Latin America Split in Davos

September 4, 2007

Mexican president Felipe Calderón strode off to the World Economic Forum with a bold agenda. At the forum and in meetings with European business leaders and heads of state, he presented Mexico as the guarantor of economic orthodoxy and explicitly criticized Latin American nations that have deviated from the path laid out by the international financial institutions and the U.S. government.

Mexican president Felipe Calderón strode off to the World Economic Forum with a bold agenda. At the forum and in meetings with European business leaders and heads of state, he presented Mexico as the guarantor of economic orthodoxy and explicitly criticized Latin American nations that have deviated from the path laid out by the international financial institutions and the U.S. government.

The sparks flew in a panel discussion on the future of Latin America. In an oblique but obvious criticism of Hugo Chávez, Calderón warned against a return to “lifelong personal dictatorships” and then reproached Bolivia and Venezuela by cautioning against “a return to old policies of the past of expropriation and nationalization.”

Brazil's president Lula responded quickly and firmly, noting that Chávez “was elected three times, in the most democratic way possible” and defending Bolivia's right to control revenues from gas production. Yet another diplomatic melee has ensued between Felipe Calderon and the Venezuelan president, who reproached the Mexican president's tactic of “seeking to project one country by running over other countries.”

DIVIDING LINES

This isn't the first time that a Mexican president has rankled the sensibilities of fellow hemispheric leaders while traveling abroad. Opposition leaders in the Mexican Congress immediately issued a call for “prudence” in the conduct of the nation's foreign policy—reflecting similar criticisms of the Vicente Fox administration.

But there is an important difference between the two presidents from the National Action Party (PAN). Although Fox's off-the-cuff remarks also stemmed from his free-market ideology and his commitment to the U.S. international agenda, they reflected more a lack of impulse control than a thought-out political strategy.

Calderón, on the other hand, went to Davos to pick a fight. As a strategy to appeal to foreign investors, he painted a divided Latin America—with Mexico standing as a regional leader of those countries adhering to the rules set forth by the United States and the international finance organizations, and standing up to other countries that seek alternatives and modifications to the neoliberal model.

In the past two years, the majority of the 35 countries in the Western Hemisphere held elections. In the wake of those elections, an axis of Latin American nations has emerged that challenges both U.S. hegemony in the region and the dictates of free trade. The contested triumph of the right in Mexico bucked the regional trend by sending to office a government that elevates the role of the private sector in boosting development and views government intervention in the “free market” economy with skepticism. Calderón's campaign promises to seek reconciliation with Southern Cone countries clashed with its ideological goals, raising questions about the role the new government would play in a changing continent. Felipe Calderón's statements in Europe have answered those questions by overtly seeking to disassociate Mexico from the renegades and prepare the ground for more privatization in the country.

BEST DEFENSE—A STRONG OFFENSE

The new president evidently decided that the best defense is a strong offense. Calderón is operating on a paper-thin margin of legitimacy and within a country that has not healed from the polarization that deepened over the course of last year's presidential elections. In the best of cases—not taking into account the possibility of electoral manipulation and fraud—he took office supported by only 21% of registered voters.

Nonetheless Calderón apparently has interpreted his victory as proof that in Mexico the present economic model won the hearts and minds of the population. “[The dilemma],” he stated, “is whether we are going to promote more rapid and diverse markets, more global investments, or whether we are going to return to regimens of the past, of closed and centrally planned economies, controlled by the government through expropriations. And that, my friends, was the decision Mexico had to make in the July 2 elections.”

In Davos, Calderón presented a series of facile dichotomies: past and future; democracy or “dictatorial regimes”; free markets or closed economies. By doing so, he caricatured Latin American politics today, ridiculed many of its leaders, and dismissed the views of the millions of Mexicans who voted against him and for a very different economic project.

The opposition to the PAN candidate grew out of a deep disenchantment with the economic model. Much of Mexico's population, especially its poorest and most vulnerable sectors, believes it is not represented by the Calderón government. But instead of attempts at reconciliation, in Davos the new president reaffirmed his commitment to ensure that Mexico remains a poster child for the status quo. By carrying an ideological platform of economic orthodoxy into the international arena, Calderón rubbed salt in wounds still fresh from the post-electoral conflict.

WOOING INVESTORS BY INSULTING NEIGHBORS

Despite the fireworks between world leaders, Calderón's primary objective on his European tour wasn't politics at all but economics, and it was there that he made a distinction between Mexico and its southern neighbors. Davos is the premier forum for the high rollers of globalization and political leaders attend as supplicants. In scores of meetings with investors and corporate heads, the Mexican president sought to position Mexico as a destination for global investment.

His strategy for doing this was to say: We're the ones who have toed the line, we're the ones who have followed all the rules. These other countries have misbehaved so choose us (and not them). By criticizing other nations in the hemisphere Calderón has established an us vs. them dichotomy that strategically aims to put distance between Mexico and the rest of Latin America in order to find favor with global investors.

It stems from a vision of the future where developing countries battle each other for foreign investment as the sole motor of development. Stating erroneously that “Goldman Sachs in its predictions for the future, established that by the year 2040 Mexico will be one of the five largest economies in the world,” Calderón sought to place Mexico in the winners' circle of globalization, among the so-called “BRIC” countries—the acronym for Brazil, Russia, India, and China.

But as Alejandro Nadal has ably pointed out, Mexico is far from fulfilling the growth prerequisites of these four up-and-coming powerhouses. To varying degrees, these countries have followed strategies that refuse the formulas imposed by the international system. Under Lula's leadership, Brazil has joined with many developing nations to insist on concessions within the trade system—a reduction of developed country subsidies but also the right to produce generic medicines and other issues that go against the terms of free trade as promoted by the United States and Europe.

All have challenged economic orthodoxy by reserving an active role of the state in economic planning, technology transfer, and education. As the most dynamic economies in the world, by calling into question the theory and the practice imposed by the international financial institutions and developed countries they have contributed to a consensus on the need to rethink economic models in developing countries.

Mexico has done just the opposite. In globalization forums throughout the world, during the six years of the Fox administration it championed the cause of the United States—often purposely undermining the negotiating efforts of developing countries. From the Derbez draft at the WTO ministerial meeting in Cancun to Fox's petulant defense of the now moribund Free Trade Area of the Americas (FTAA) in Mar del Plata, making common cause with other developing nations even in its own region has been off the Mexican government's agenda.

In Davos, Calderon even went so far as to defend the FTAA, saying, “... in the discussion of the FTAA, political motives and political-ideological prejudices prevailed over reason.” He was instantly contradicted by José Miguel Insulza, head of the Organization of American States, who replied: “It doesn't seem to me that it was about political prejudices. The problem is the fact that countries have followed different paths. In 1998 we talked about FTAA, but it's not going to happen. This is a fact and we have to accept it and find another way.”

Besides being bad form in diplomatic terms, this stance is remarkably shortsighted as an investment incentive. Investors tend to be pragmatic. They usually leave the ideological underpinnings to the state and to invest where returns are highest—regardless of whether a country follows the Washington-led economic orthodoxy.

Developments over recent years in investment in Latin America must be frustrating to the National Action Party (PAN) governments. After following the lead established by Carlos Salinas and selling off most of Mexico's assets except those that would have untenable political repercussions, the nation faces harder times in attracting direct foreign investment.

According to the UNCTAD, Brazil took in far more foreign direct investment than Mexico in 2004, and Argentina—also criticized by Calderón as a rule-breaker—doubled its share in the last year. With China draining off Mexico's maquiladora industry, even cheap Mexican labor has lost its competitive edge.

Playing by the rules counts, but a stable business climate, steady workforce, modern infrastructure, and transparency weigh heavily into corporate investment strategies. An inflexible ideological stance in a polarized society bodes ill for maintaining those factors. A fractured and isolated Mexico is not the way to attract foreign investors.

GEOPOLITICS OF THE RIGHT

Although President Calderón says this is not an issue of left and right, the vision of globalization he laid out in Davos was clearly ideologically guided. Revealingly, his clashes with center-left leaders in the hemisphere happened at the same time as the new headquarters of the Christian Democratic Organization of America were being inaugurated in Mexico City.

The Christian Democratic Organization is a group of 33 rightwing political parties headed by PAN president Manuel Espino. At its international conference, the Christian Democratic group vowed to fight the spread of leftwing governments on the continent and set out a strategy of promoting free trade and striking alliances to defeat “populists” on a country-by-country basis.

In particular, leaders of this right-wing movement referred to the “threats” posed by Venezuela and Cuba. According to information published in the Mexican daily La Jornada, the Christian Democrats offered the large contingent of Cuban-American exiles a political base in Mexico from which to orchestrate a “peaceful transition” in Cuba. The concern is that given the organization's close ideological ties to Calderón, Mexican foreign policy could be used to promote that goal—contrary to a long history of support for the island among the Mexican people and neutrality in foreign affairs.

The Christian Democratic Organization also has close ties to rightwing “regime change” efforts spearheaded by the U.S. government. Its vice president, Marcelino Miyares, a Miami resident, is head of the Cuban Christian Democratic Party and a veteran of the Bay of Pigs operation. Prominent guests at a November 30 event in Mexico City included representatives of the U.S. International Republican Institute (IRI)—the IRI funneled millions of dollars in U.S. taxpayer money to groups that opposed Chávez, including the Christian Democratic party COPEI, during the years preceding the April 2002 coup, and to groups participating in the ouster of Haiti's Aristide.

According to news reports, Espino toned down his speech to avoid linkage between the PAN's simultaneous offensives against the left in Davos and Mexico City. In both cases, although it holds the presidency the Mexican right faces some serious obstacles in turning back the center-left tide in the region. For one thing, its most powerful ally—the Bush administration—is at its weakest point ever. Its approval rate is among the lowest in the hemisphere and democrats are already rallying to turn the debacle in Iraq into a referendum on the Republican Party and conservatism in the next presidential elections.

For another, the center-left governments in Latin America now have a quorum for making common cause and the right in many of the countries has taken a substantial beating. More-of-the-same is no longer a winning formula, and rightwing parties have been so locked into the defense of vested interests and ideological orthodoxy that they have been unable to offer anything much beyond that.

LATIN AMERICAN UNITY OR DOG-EAT-DOG GLOBALIZATION?

By drawing a dividing line along who should be rewarded for holding to capitalist orthodoxy and who should be punished for insubordination, Calderon has made a plea to investors to reward Mexico's obedience and let the sinners be damned.

Diplomacy and politics take a back seat in this vision. Latin American unity is seen as a chimera. “Without naming names, it seems to me the more we talk about Latin American unity the more we generate tensions between Latin American countries,” Calderón stated in reference again to Chávez's Bolivarian Alternative.

Even the Spanish newspaper El Pais, normally partial to Calderon, felt compelled to deliver a light scolding: “Calderón, as president, should show himself to be less ideological when establishing good relations with the Southern Cone and Venezuela and put more emphasis on Latin American integration.”

Oddly enough, Calderón's belligerence contrasts with the tone of recent statements coming out of Washington. In a speech in the Center for Strategic and International Studies, Assistant Secretary for Western Hemisphere Affairs Thomas Shannon called for reconstruction of “Pan-Americanism” in a “post-Washington Consensus” continent. Although he emphasized that “trade is a vitally important component of this integration because it links markets and the economies of the world today are not driven by nation-states, they are driven by markets,” he also stressed the importance of the social agenda and cooperation, and downplayed conflicts with Venezuela.

Under fire for its Iraq policy, the State Department has apparently decided to try to rebuild its hegemony in Latin America through more low-profile actions. Although it's still not clear what Sec. of State Condoleezza Rice means by a new agenda of “positive engagement,” it appears to involve efforts to consolidate a geopolitical base in the straying region by avoiding rhetorical confrontations with leftist leaders, and emphasizing economic dependencies and security compacts.

TROUBLE ON THE HOME FRONT

On the home front, Calderon's insistence on an unmitigated free-market system may soon come back to haunt him. After elections in which half the population vehemently called for reforms to attend to the growing needs of the poor, his refusal to conciliate could lead to instability.

The warning signs are already here: Mexico is a nation that exports half a million people a year—mostly the poor and underemployed who “vote with their feet” against an economic system that has failed them. Just days after the Davos forum, tens of thousands of Mexicans marched in the streets to protest a price rise in tortillas and declining real wages. Social protest in several states, notably Oaxaca, has refused to subside even in the face of violent repression.

A presidential crusade to position Mexico as a model of the right in Latin America is not good for Mexico, no matter what one's ideological orientation.

By claiming obedience to globalization's strictest rules as a virtue, Calderon publicly eliminates policy space for much-needed corrective measures. By making conservative free-market economics Mexico's platform for competition, Calderon rejects demands for a new or modified economic model and for social programs to reduce inequality. These are policies that will inevitably inflame Mexico's internal differences.

As foreign policy, the strategy simply defies common sense. It's never a good idea to antagonize the neighbors. The PAN government has routinely exacerbated conflicts with heads of state in the South, made the terms for cooperation more difficult, and drawn lines of difference where there could be a common search for solutions to shared problems. It has also explicitly rejected interesting prospects for alternative forms of integration on the continent.

Moreover, it has done this on a continent where active populations have forced governments to recognize that the free-market system should not be the sole determinant of national policy—given the vast inequality it creates. The popular backlash against the dominant economic model has led to political rebellion and a rethinking of the constitutional basis of society in Latin America. Bolivia has established a Constituent Assembly to restructure government and the political economy, while in Ecuador supporters of President Rafael Correa stormed Congress with a demand for the same, and on Jan. 31 scores of thousands of Mexicans filled the streets of the capital with demands that included a “new social pact” among the priorities for change.

THE SEARCH FOR NEW PATHS

The assumption that government involvement in the economy is a thing of the past has fallen into disrepute in recent years. It has become evident that the internationalization of markets required—and requires—major state involvement: re-designing national programs, subsidizing investment and export industry, and creating regulation oriented toward the interests of transnational corporations and their economic activities.

The adverse impact of free-market economics has made plain the need to create at a minimum some checks and balances within the global system and in a more general sense develop proactive government policies to address the rights of the poor.

The crux of the matter is a search for a new path, or new paths, that leave behind the huge inequalities generated by the neoliberal model and open up political space for the state to reaffirm its responsibilities to all its citizens.

Calderon's recent broadside against other Latin American countries that are exploring new development strategies sets the Mexican government up as an obstacle on that path.

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